Littelfuse’s Great Q1 Elicited a Positive Market Reaction, but We See More Room for Shares to Run

Narrow-moat Littelfuse’s first-quarter results dazzled on both the top and bottom lines, and we’re maintaining our $318 fair value estimate. We’re impressed with Littelfuse’s ability to offset cost inflation with price increases, but we expect pricing impact to lessen through the year. The top line was helped by inorganic contributions, but we continue to see robust organic demand. We think the marriage of organic and inorganic growth aligns with management’s long-term strategy (and exemplified by the acquisitions of C&K Switches and Embed in the quarter), and we have confidence in Littelfuse’s ability to execute on both over the long term. Shares were up as much as 10% following the call on near-term profitability but still look fundamentally undervalued to us.